China’s Long Term Economic Strategy

By Rachel Alexander, on December 2nd, 2012

The present Chinese regime has learned the lessons of history better than our own government, which is why they are persuing their present strategy.

Pull out any good quality history of Chinese culture and at some point you will find a reference to a belief, existing well over two thousand years ago, that China was destined to rule the world. The reasons for this belief appear to be rooted in a socio-religious tradition rather like that which led Japan into its militarist stage in the first half of the 20th century. Japan’s attempt at imperialism was misplaced. It lacked the population and resources to undertake a major war of conquest. Its efforts were better placed in the economic success that it enjoyed from the 1970’s forward until rapid overextension slowed its economy to a crawl. Japan, perhaps taking its cues from the Euro-American model of business, tried to move too fast.

China, meanwhile, has taken a different route. Interestingly, the major obstacle in China’s way, until recently, has been China. For many centuries China was politically divided. Various families ruled different regions while attempting to conquer their neighbors. They also had do deal with invasions by the Mongols, Jurchens, and occasionally others. This division of China came to an abrupt end when the Manchurians were successful on conquering and unifying essentially the entire divided nation. It didn’t last long, as the ruling dynasty was corrupt and profligate. China rapidly became a bankrupt third-rate power that again divided into different regions operating under significant foreign influences. It was at this point that Mao and Chiang Kai Shek became rivals for control of the population, only to run in the Japanese invasion bent on acquiring control of iron mines in the northeast region. Eventually the Maoists won and Chiang’s nationalists were forced to leave for Taiwan. Mao then proceeded to wreck what was left of the Chinese economy and society through such activities as the “cultural revolution” and “great leap forward.” Neither produced any positive results, and China languished, for the most part, until Mao’s death.

It is well known that Mao was a professed Communist, and he ran the nation along that model, but if another political theory had been available that led to the same concentration of power in his hands he would have been more than willing to use it as well. Mao’s sole interest was power, which is amply illustrated by the fact that he did nothing to change course when his prescriptions failed to produce results. Only after his death was China able to begin charting a course toward commercial prominence.

Today’s Chinese government is still called “Communist” by most commentators, but in fact, it has very few relics of Mao’s regime in place other than its authoritarian structure. Authoritarianism is the key point, which leads to the one essential fact of Chinese political culture today: The government has not given up the dream of conquest, but it knows that it needs a strong economy to accomplish anything in that direction. As a result, it has undertaken a course similar to that of Germany in the 1930’s; it has given those businesses not under direct government control free rein to make money in a full capitalistic spirit, but at the same time it demands from them absolute loyalty and a practice of complete disinterest in national politics. So far, this policy is working quite well.

China has become the number one producer of consumer goods for consumption in the one nation that might have provided its biggest challenge; the USA. It produces goods in essentially every field including especially high technology items, which has enabled them to effectively pirate that technology for its own purposes. It has also become a major lender to the US, and has been using the interest payments on that debt to fund military expansion. In short, China has abandoned the direct military option for an economy first approach that may, in some respects, make militarism unnecessary. This becomes particularly important when one considers that its long term financial strategy may be to force the USA into the position of a vassal state with the tacit assistance of a US government that is unwilling to admit that any danger exists; either from China or from its own mismanagement of the American economy.

What is often misunderstood is that China is not interested in poisoning the American public (or its pets) with contaminated products. Rather, it is more interested in forcing what was once the world’s greatest trading power into economic dependency. A national government that does its level best to destroy business, to tax its people into poverty, and to engage in cronyism to the extent that free markets become dominated by big companies with pockets deep enough to pay off officials for favors, plays completely into China’s plans. But it isn’t a cadre of fatigue wearing collectivists we have to be concerned about. Instead it is a group of politicians who completely understand that business and finance can be an even more potent weapons than the “barrel of a gun” that Mao said was the source of all power. Mao was wrong, and he crushed China’s potential almost completely during his reign. But now China has broken free of its past.

Germany needed to become economically potent to fund its participation in World War II. China is probably learning from the German experience and will likely use money and production instead of bullets. If Barack Obama is still around to see the results it is unlikely that he will relish Chinese dominance any more than he does American dominance. Of course by then it will be too late, and China does not like rabble-rousers. If he is in any position to cause trouble, expect whoever is running things in Beijing to lock him up and throw away the key.